100,000 homes sold to fund care

This shocking, recently revealed, statistic represents the number of pensioners that sold their homes to fund residential care in 2010. 20,000 of these were forced to sell. Part of the Legislation within the Community Care Act 1990 gives local authorities the power to forcibly sell a persons home to fund long term care.

In the last five years over 100,000 people have sold their property to fund domiciliary care and in fact a third of all those paying for care end up losing their home. Affinity Wills can help you avoid this dilemma.

Lifetime Asset Trust

For most people, ownership of their own property does not always mean they are wealthy - in the sense of having money to spend. Even in an environment of rapidly increasing property values, home ownership for most of us is usually more about practical issues, such as a place to live, somewhere to invite friends or an inheritance for children or grandchildren.

In practice, there may be a number of reasons why the use of a trust in respect of our home may offer valuable benefits. After all, most of us would like the option to ensure the home we have paid for over the years passes to our family or friends when we no longer have a need for it.

The Affinity Wills Lifetime Asset Trust is designed for homeowners, usually living on their own and involves the transfer of your home to a trust. Under the trust, you as the person creating the trust (the settlor) are also the beneficiary so that once the trust is created, you may continue to live in your house for the rest of your life, or until you decide that continued residence is no longer required or appropriate.

How does it work

The following diagram illustrates the simplicity of the Lifetime Asset Trust.

Despite the fact that the trust now owns your home, you still have a good deal of flexibility. For example, if in the future you wish to move to a smaller property, you retain the right of residence in the new property and have access to any excess funds to augment your income.

What are the benefits?

The principal benefits of establishing a Lifetime Asset Trust include:

By making a gift into the trust, control of your home rests with the trustees, which will usually include you. You also ensure that it will pass to those individuals you wish to benefit at the time selected by you - for example, when you die.

To speed up the administration of your estate and avoid the costs that can be associated with Probate.

To enable your home to be held for individuals who cannot hold it for themselves - for example, children or disabled persons.

The ability to protect the value of your home from spendthrifts or keep ownership of the property private or secret.

To protect the property should one of your children experience a breakdown in their relationship.

It may avoid the value of your home being included in a local authority means test for residential or domiciliary care.

Although not all of these reasons will apply to every individual, the impact of just one or two may be sufficient justification to proceed.

What are the uses?

The Lifetime Asset Trust is designed for mature individuals who wish to continue living in their home for the rest of their lives and are concerned as to how their property or its proceeds could be used on their death.

Prior to establishing the Lifetime Asset Trust there are a number of issues we recommend you consider:

a) Individual circumstances vary a great deal and it is impossible to state categorically that this, or any other method of estate planning, is best for you without carrying out a thorough review of your affairs.

b) It is sometimes advisable to discuss your plans with those of your immediate family who will derive the greatest benefit from the arrangement. i.e. the beneficiary(ies) of your estate.

c) If you need long-term care and you have previously placed your home in trust, the right of residence will usually be replaced by the right to receive an income. This income will be allocated towards the cost of care, although the capital value of the property will usually be disregarded.

d) If, having moved into care, it can be proven that you have deliberately deprived yourself of resources (including your home) solely for the purpose of avoiding long term care you can be considered as still having those resources and the local authority will calculate your entitlement accordingly. This could include the setting up of a Lifetime Asset Trust.

The timing of the disposal of the asset has to be taken into account. While there are no hard and fast rules, the longer the period between the gift and the need for care, the lower the likelihood that "deliberate deprivation" can be proved.

e) Of course, you could simply give your home to members of your family without the use of a trust. However, we strongly recommend you do not do this because:

- Once you have given your home away, it is no longer yours and you lose all control over it. What if the recipient was your son or daughter and they were to divorce, die before you or become bankrupt?

- The new owners could pressure you into entering residential care sooner than you thought necessary or would have wanted to.

Both of these pitfalls can be avoided by use of the Lifetime Asset Trust.

f) Finally, there are some local authority grants for repairs/maintenance to your home that, if you proceeded with the Lifetime Asset Trust, you would no longer be eligible for. These are mainly concerned with making improvements to enable an infirm or disabled person to continue living in their home.

The next step

If you are concerned about the effect that having to meet the cost of residential or domiciliary care will have on the amount of money that you leave to your family and friends, you may wish to consider the benefits available through the Lifetime Asset Trust.

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